Kuwait forges ahead with $14bn refinery despite oil slump

Muhamad Fadhil

06-Mar-2015

Focus article by Muhamad Fadhil

Kuwait forges ahead with $14bn refinery despite oil slumpKUWAIT CITY (ICIS)–Kuwait is forging ahead with building a planned $14bn mega refinery despite the recent crash in oil prices, but its downstream petrochemical expansion may be put on hold, industry sources said on Friday.

Construction of the 615,000 bbl/day Al-Zour refinery by state energy firm Kuwait Petroleum Corp (KPC) is expected to start in full swing sometime this year, with the facility likely to be operational by the end of the decade, according to a source close to the project.

KPC was not immediately available for comment on the project’s status.

“[Oil] slumps go through cycles. Kuwait is confident of its Al-Zour investment,” according to a Dubai-based energy distributor.

The project will boost Kuwait’s refining capacity by 66% from the current 930,000 bbl/day from three refineries at different locations, namely, Mina Ahmadi, Mina Abdullah and Shuaiba.

Kuwait intends for the bulk of the oil products from the Al-Zour refinery to be for exports.

“With Al-Zour, Kuwait will consolidate its position as a major energy exporter,” a source close to a Middle East petrochemical producer said.

Petroleum export revenues account for nearly 60% of Kuwait’s GDP, according to estimates from the International Monetary Fund (IMF).

Major oil and petrochemical producers in the Middle East have started to re-think their long-term investments following the recent crash in oil prices. From June 2014 to mid-January this year, crude prices had slumped by more than 60% on concerns over a supply glut amid weakening global demand.

“Oil and petchem suppliers are re-looking their portfolio and considering the feasibility of expensive investments,” a Saudi-based polymer source said.

While Kuwait’s Al-Zour refinery is more or less assured of proceeding as planned, industry sources noted that the same could not be said for the country’s petrochemical project called Olefins III under Petrochemical Industries Company (PIC), a subsidiary of KPC.

The project remains in the early stages of planning, a PIC source said.

PIC has plans to develop a 1.4m tonne/year cracker but its feed slate is yet to be finalised.

The project will likely include downstream polyethylene (PE) and polypropylene (PP) production, with start-up slated in 2017 or 2018, according to the company’s website.

It remains unclear if the company will be able to keep with the original timeline as project construction has yet to begin, the PIC source said.

Elsewhere in the Middle East, Methanol Chemicals Co (Chemanol) announced that it will re-do a feasibility study on a planned 60,000 tonne/year sulphonated naphthalene formaldehyde plant in Saudi Arabia in view of recent declines in oil prices.

In Qatar, a $6.5bn petrochemical project in Ras Laffan was scrapped in January due to poor economic conditions in crude markets.

The Qatar Petroleum-Shell joint venture project called Al Karaana was supposed to include a 1.5m tonne/year monoethylene glycol (MEG) plant; a 277,000 tonne/year oxo-alcohols unit; and a 300,000 tonne/year linear alpha olefins (LAO) facility.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

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